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Wineries call old law sour grapes

The alcoholic beverage industry is too heavily regulated, said Monica Brown, owner of Cellar XV, a wine shop in Ridgefield. Further, she said, in the age of e-commerce, bans on interstate shipping are becoming very outdated. <p>Small wineries across the country share Brown's frustration, Most states, including Connecticut, ban people from buying wine directly from out-of-state suppliers.
/ Source: The News-Times Online

The alcoholic beverage industry is too heavily regulated, said Monica Brown, owner of Cellar XV, a wine shop in Ridgefield. Further, she said, in the age of e-commerce, bans on interstate shipping are becoming very outdated.

Small wineries across the country share Brown's frustration, Most states, including Connecticut, ban people from buying wine directly from out-of-state suppliers.

However, those state laws are being challenged. The U.S. Supreme Court, which will make the final decision, heard arguments on the matter Tuesday.

"This just opens commerce channels," Brown said. "We have a lot of customers interested in having wine shipped to vacation homes, friends and family."

Justices were hearing arguments Tuesday in three appeals involving bans in Michigan and New York on direct shipments that cross state borders. The dispute pits regulators and wholesalers against out-of-state wineries that want to sell alcohol to consumers, mostly over the Internet or by phone.

Connecticut, New York, New Jersey, Massachusetts and Vermont are among 24 states that ban direct interstate shipments, according to the Washington-based Institute for Justice.

Brown said changing the law could especially benefit the smaller wine sellers.

"The big wineries and big distributors want to keep these antiquated laws as they are," Brown said. "They don't want competition. It is ridiculous how regulated the liquor retail industry is compared to others."

Tuesday's case only involves wine sales, but industry groups representing distributors for beer and other alcohol also have asked the high court to rule for continued state regulation, believing that the justices' decision eventually could apply to them.

John Carter, manager of the New Fairfield Liquor Shop, said changing the law would likely take away business from the retail liquor stores.

That's not his only concern.

"It would be easier access for minors on the Internet," Carter said. "There are plenty of products through the channels available now."

Dr. Paul DeGrazia, owner of DeGrazia Vineyards and Winery in Brookfield, said safeguards could be in place to prevent minors from buying alcohol online.

"We should require a signature and identification to accept the package," DeGrazia said. "I don't understand why these laws exist. This is America. We believe in free trade."

DeGrazia said lifting the halt on interstate shipping would be a big help for small wineries.

"We get requests all the time from every state in the union," he said. "We can't ship out of state. It is a felony in some states, so we don't do it at all."

The case involves a clash between two parts of the Constitution, with lower courts divided over which section should rule.

On one side is the 21st Amendment, which ended Prohibition in 1933 and explicitly granted states authority to regulate alcohol sales. Twenty-four states have laws that generally require outside wineries to sell their products through licensed wholesalers in the state. Michigan and New York allow in-state Internet or telephone sales of alcoholic beverages. Some other states allow such sales, others do not.

The Constitution also implicitly prohibits states from passing laws that discriminate against out-of-state businesses. That provision has been embraced by wine makers who hope to reach faraway Internet customers looking for favorite U.S. vintages unavailable in their home states.

While the 2nd U.S. Circuit Court of Appeals sided with New York in upholding the state restrictions, the 6th Circuit, based in Cincinnati, Ohio, struck down Michigan's laws as unconstitutionally protectionist.

"Connecticut wineries are relatively small — and that's our market. It would benefit us a lot if we had people who visited here be able to buy an extra case," said Larry McCulloch, the general manager and winemaker at the Chamard Vineyards in Clinton. "There's a huge market out there."

The stakes are high in the $21.6 billion wine industry. States collect millions of dollars in alcohol taxes and claim the established system helps stem fraud and underage drinking. They argue they have less enforcement power over out-of-state sellers who aren't licensed.

"Allowing Internet sales of a highly dangerous and highly regulated product, such as alcohol or tobacco, is a genuine concern for state regulators," attorneys general from Ohio and 32 other states argue in a friend-of-the-court brief backing Michigan.

"The question is, 'Do you think alcohol is a socially sensitive product that should be regulated by states and monitored by parents?' For more than 50 years, it has been," adds Georgetown law professor Viet Dinh, who is helping represent wholesalers.

Since 1980, the number of wineries has quadrupled nationally to more than 3,700 this year, and their survival depends on state laws that give them a fair shake, the National Association of American Wineries argues in a friend-of-the-court filing.

For many, the Internet has become the preferred means of shopping.

Carter, manager of New Fairfield Liquor Shop, said that could harm liquor stores in the long run.

"It could have a minimal effect in the beginning," he said. "In the future, computers could be the prevailing way to shop and it would have an effect down the line."

Brown, owner of Cellar XV, said as the Internet has become a leading form of commerce, it is only fair to allow wine sellers to use it.

"There is so much convenience to online shopping," Brown said. "People are able to order from their favorite store. It is like ordering a pair of boots. It is a product. The only concern is minors. That can easily be remedied."

The Associated Press contributed to this story.